The MHC has also expressed concern some residences are "institutional in nature"
It has emerged that 95 children were admitted to adult mental health centres in Ireland last year.
In its annual report for 2015, the Mental Health Commission (MHC) says this situation is "unacceptable and needs to be addressed as a matter of urgency."
It also found "persistent failings" included the admission of children to adult units, the failure to embed the concept of recovery in the service and a shortage of appropriate staff.
The Commission also requested quality improvement plans in 20 of the 24-hour staffed community residences in 2015, following inspection reports.
"The Commission continues to be concerned about specific issues related to these residences, and believe some of them to be too large, have poor physical infrastructure, to lack individualised care plans and in effect not to qualify as 'community care' as they are institutional in nature."
The Mental Health Reform group has echoed these concerns, that people with severe mental health difficulties are living in "unacceptable conditions" in "mini-institutions" around the country.
Director of the group, Dr Shari McDaid, says: "It is imperative that the remit of the Mental Health Commission is extended at the earliest opportunity to empower it to regulate community based services."
"The recommendations of the expert review of the 2001 Mental Health Act should be implemented without delay."
"Another concern is that we have no idea exactly how many of these residences are in operation around the country and therefore how many people might be living in these institutionalised settings," Dr McDaid added.
24-hour supervised residences were built to accommodate those who had resided in larger, old-style psychiatric hospitals, and - Mental Health Reform says - in essence are these people's homes.
It is recommended that such homes should be confined to no more than four residents. However 40% of residences inspected by the MHC in 2015 had more than 13 beds.